A 

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LIBRARY 


A 


UNIVERSITY  OF 
CAUFORNIA 

SAN  oiEeo 


THE  INDUSTRIAL  REPUBLIC 

A  Study  in  Industrial  Economics 


BY 


Paul  W.  Litchfield 

Vice-prcaident  and  Factory  Manager,  The  Goodyear  Tire  &  Rubber  Co. 


All  Rights  Reserved 


AKRON.  OHIO 
19  19 


33' 


COPYRIGHT 

19  19 


THE    INDUSTRIAL   REPUBLIC 

CONTENTS 

Chapter  I. 

Expansion  of  Political  Democracy. 

Chapter  IL 

Genesis  and  Development  of  the  Labor- 
Capital  Opposition. 

Chapter  III. 

Present  status  of  the  Labor-Capital  Op- 
position. 

Chapter  IV. 

Clues  to  the  Solution. 

Chapter  V. 

Rights  involve  Duties. 

Chapter  VI. 

The  Industrial  Republic. 

Chapter  VII. 

Industrial  Citizenship. 


[3] 


THE    INDUSTRIAL    REPUBLIC 


CHAPTER  I 

Expansion  of  Political  Democracy 

After  four  years  of  fighting  between  all 
the  leading  nations  of  the  world  to  deter- 
mine under  what  form  of  government 
people  should  live  in  the  future,  we  would 
naturally  look  for  an  era  of  peace.  Instead 
of  this,  we  find  a  state  of  anarchy  and  civil 
war  in  some  of  the  nations,  and  a  feeling  of 
industrial  unrest  in  others.  The  focusing  of 
attention  on  the  faults  of  political  govern- 
ment has  produced  a  similar  focusing  on  the 
faults  of  Industrial  Management. 

The  result  of  this  is  an  alarming  state  of 
affairs  in  Eastern  Europe  which  is  gradually 
spreading  westward,  and  every  effort  should 
be  made  to  determine  its  cause,  to  see  what 
the  points  of  misunderstanding  are  between 
management  and  men  in  Industrv,  and  to 


[5] 


THE    INDUSTRIAL   REPUBLIC 

find  out  at  what  point  the  two  sides  can 
meet  with  fairness  to  both. 

As  the  conditions  of  civil  war  prevaihng 
in  Eastern  Europe  and  the  conditions  of 
general  unrest  spreading  westward  are  the 
direct  outcome  of  the  world  war  just 
finished,  a  proper  understanding  of  the 
causes  of  this  unrest  necessitates  a  review 
of  the  war  in  the  particular  phases  which 
have  a  bearing  on  the  present  industrial 
problem. 

Looking  back  to  1914,  we  find  Germany 
a  highly  efficient  empire,  ruled  by  a  small 
autocratic  minority,  who  by  efficient  and 
progressive  direction  had  united  a  group 
of  small  states  into  a  nation  and  made  this 
nation  very  powerful.  It  reached  a  stage 
where  it  could  produce  much  more  than  it 
could  consume  and  had  to  depend  very 
largely  upon  the  outside  markets  to  sustain 
its  rapidly  growing  population.  It  found 
other  nations  in  political  control  of  these 
markets. 


I«l 


EXPANSION    OF    POLITICAL    DEMOCRACY 

The  German  Nation  had  come  to  beUeve 
on  account  of  its  rapid  rise,  productivity 
and  power,  that  its  "Kultur"  was  superior 
to  any  other  upon  earth,  and  that  as  a 
missionary  it  should  give  its  benefits  to 
constantly  increasing  areas  whether  the 
inhabitants  desired  it  or  not.  The  result 
was  that  after  many  years  of  preparation 
for  world  control,  feeling  herself  capable  of 
carrying  her  government  by  force  of  arms 
to  other  countries,  she  seized  the  first  con- 
venient opportunity  and  threw  down  the 
gage  of  battle.  She  engaged  her  immediate 
neighbors  in  a  struggle  of  life  or  death. 

The  initial  advantage  gained  by  Ger- 
many, owing  to  her  state  of  preparation, 
followed  by  her  barbarous  methods  of  war- 
fare and  arrogant  assertion  of  her  desires 
and  intentions,  first  shocked  and  then 
aroused  the  leading  self-governing  Nations 
of  the  earth  to  the  danger  threatening 
their  own  free  institutions  and  future 
safety.   The  whole  conflict  took  the  form  of 


THE    INDUSTRIAL   REPUBLIC 

a  world-wide  contest  to  see  w^hether  govern- 
ment should  be  by  self-determination,  peo- 
ples having  a  voice  in  their  forms  of  govern- 
ment, or  whether  a  small  autocratic  minority 
should  establish  itself  in  the  control  of 
Nations  on  the  principle  of  "Might  makes 
Right." 

Russia,  one  of  the  leading  nations  against 
Germany  at  the  beginning  of  the  war, 
revolted  from  the  government  of  the  Czar 
and  established  a  republic.  Soon  after- 
wards, the  first  Russian  Republic  was  over- 
thrown by  a  second  revolt  and  a  Socialist 
Republic  started.  This  was  unable  to  main- 
tain itself,  and  a  third  revolt  took  place, 
throwing  the  Russian  Government  into  the 
hands  of  the  Proletariat.  Conditions  of 
civil  war  and  anarchy  became  prevalent,  and 
the  new  Government  withdrew  from  the 
alliance  of  democracies,  leaving  that  alli- 
ance facing  both  ways,  fighting  Autocracy 
on  one  hand  and  Anarchy  on  the  other. 

The  first  issue,  that  of  fighting  autocracy, 


[8] 


EXPANSION  OF  POLITICAL  DEMOCRACY 

was  settled  in  November  1918  by  the 
triumph  of  Democracy.  The  second  issue , 
that  of  fighting  anarchy,  has  not  yet  been 
settled,  it  being  the  avowed  intention  of  the 
present  Government  of  Russia  to  sow  the 
seeds  of  discontent  and  civil  war  throughout 
the  civilized  world. 

The  Russian  Bolshevik  declares  his  revolt 
to  be  not  against  political  hereditary  autoc- 
racy, but  against  capitalism.  He  calls 
upon  the  peoples  of  the  world  to  arise  and 
overthrow  it.  His  remedy  is  the  destruction 
of  all  capital,  and  he  proceeds  to  build  up 
an  autocracy  based  on  ignorance  of  the 
most  cruel  kind,  setting  back  the  clock  by 
centuries  and  bringing  about  idleness  and 
starvation.  And  the  fact  remains  that  he 
has  succeeded,  up  to  the  present  at  least,  in 
putting  his  ideas  into  absolute  effect  over 
a  Hundred  Million  People  of  the  white  race. 
A  state  0}  "peace  cannot  come  on  Earth  as  long 
as  this  challenge  remains  wiansivered. 

Bolshevism  is  an  industrial  disease,  and 


[9] 


THE    INDUSTRIAL   REPUBLIC 

a  very  contagious  one  wherever  it  finds 
lack  of  confidence  in  the  management  of 
Industry,  and  a  feehng  of  injustice  amongst 
working  men  with  their  present  conditions. 
The  problem  which  we  must  solve  is  to 
find  a  remedy  for  stopping  the  spread  of 
Bolshevism.  The  first  step  toward  this 
solution  is  a  careful  study  and  examination 
of  the  industrial  situation,  ferreting  out 
any  injustice  which  may  be  present,  and 
establishing  a  feeling  of  confidence  between 
the  working  man  and  the  management  of 
Industry. 

The  relations  between  a  political  govern- 
ment and  the  people  living  under  that 
government  are  very  similar  to  the  relations 
between  the  Management  of  an  Industry 
and  the  People  working  in  that  Industry. 
In  other  words;  management  and  govern- 
ment are  synonymous  terms,  one  being 
usually  applied  to  the  Political  and  the 
other  to  the  Industrial  World.  Since  this 
war  has  been  foujjfht  to  establish  certain 


[101 


EXPANSION    OF    POLITICAL    DEMOCRACY 

principles  of  political  govenment,  therefore, 
it  is  only  natural  that  working-men  should 
see  whether  or  not  Management  as  it  now 
exists  measures  up  to  these  principles,  and 
if  it  does  not,  they  are  certainly  entitled  to 
know  the  reason  why. 

The  principles  of  Government  which  we 
fought  successfully  to  establish,  are  what 
we  believe  to  be  American  ideals  of  Govern- 
ment. Let  us  see  what  these  are,  and  the 
historical  development  which  caused  them 
to  be  what  they  are. 

Back  in  the  early  part  of  the  17th 
Century  a  small  group  of  Pilgrims  braved  the 
dangers  of  the  winter  ocean,  the  dangers  of 
an  unknown  land  across  the  sea,  to  leave 
their  homes  and  establish  a  new  form  of 
Government  where  they  would  have  more 
freedom  and  more  voice  in  their  affairs  than 
they  had  at  home.  Others  followed  them 
and  these  groups  formed  Colonies  along  the 
Atlantic  seaboard.  For  a  century  and  a 
half  they  lived  as  Colonies  under  the  Mother 


[111 


THE    INDUSTRIAL    REPUBLIC 

Country  with  comparative  freedom.  In 
the  latter  part  of  the  18th  Century,  England 
tried  to  tax  them  without  representation 
and  these  Colonies  then  declared  themselves 
independent  and  avowed  their  intention  of 
governing  themselves  as  an  independent 
Nation.  They  adopted  a  new  type  of 
Government,  where  representatives,  who 
formed  the  governing  bodies,  were  directly 
chosen  by  the  People. 

Failure  of  this  form  of  Government  was 
freely  predicted  everywhere.  For  it  was 
felt  that  only  the  few  were  capable  of 
governing  and  that  the  majority  could  not 
be  trusted  with  this  function. 

The  newly  organized  government  how- 
ever, under  the  Constitution  then  enacted, 
has  existed  substantially  without  change 
from  that  day  to  the  present  time.  It  has 
been  the  model  from  which  all  Republican 
Governments  have  been  patterned,  and  the 
principles  underlying  this  form  of  Govern- 
ment   have    just    won    a    glorious    victory 


[12] 


EXPANSION  OF  POLITICAL  DEMOCRACY 

establishing  those  principles  as  the  founda- 
tion for  the  Governments  of  the  world  for 
the  future. 

Yet  the  Republican  form  of  Government 
has  not  been  a  panacea  or  "cure  all."  It 
has  not  always  met  with  success  in  other 
places.  Successful  government  by  the  majority 
depends  upon  the  character  of  its  citizenship 
and  the  ability  of  the  majority  ivisely  to 
select  representatives  to  govern  them.  It  re- 
quires a  community  of  interest  amongst 
the  people,  and  the  absence  of  sharply 
drawn  class  distinctions.  Wherever  the 
character  of  citizenship  is  low,  or  it  lacks 
intelligence,  democracy  has  not  been  an 
entire  success,  and  a  form  of  Government 
more  or  less  autocratic  has  been  necessary 
to  maintain  order  and  promote  prosperity. 
The  success  of  democracy,  therefore,  re- 
quires the  fostering  of  education  for  the 
greatest  number  possible,  in  order  that  the 
Government  may  be  of  the  greatest  good. 

The  Citizenship  of  our  own  Country  has 


[13] 


THE    INDUSTRIAL   REPUBLIC 

been  such,  that  under  a  Republican  form 
of  government  by  the  majority  we  have 
grown  to  be  the  most  influential  power  in 
the  world  and  stand  as  proof  that  what  the 
world  said  could  not  be  done,  has  been  and 
is  being  done. 

Let  us  contrast  for  a  moment  the  develop- 
ment of  the  German  Government  during  the 
past  fifty  years  with  that  of  our  own.  Prior 
to  1850,  Germany  was  composed  of  several 
small  states  and  frequently  they  had  dif- 
ferences of  opinion  and  wars  with  one 
another,  each  State  so  small  that  it  fre- 
quently became  prey  to  other  Nations. 
Lack  of  unity  and  common  interests  very 
seriously  affected  their  peace  and  pros- 
perity. But,  face  to  face  with  a  common 
danger,  they  united,  and  in  1870  succeeded 
in  overwhelming  the  French  Empire  under 
Napoleon  III  so  decisively  that  they  became 
a  world  power  of  the  first  rank.  They  were 
welded  together  in  a  strong  autocratic 
government   in   the  hands   of  a  few  very 


[H] 


EXPANSION    OF    POLITICAL    DEMOCRACY 

efficient  men,  who,  with  a  keen  reahzation 
of  the  Nation's  needs,  were,  with  the  almost 
absolute  power  given  them,  able  to  quickly 
and  quietly  do  those  thinos  which  were 
necessary  to  enhance  the  material  prosperity 
and  power  of  the  German  Nation. 

There  is  no  question  of  the  maximum 
efficiency  of  autocratic  government  when 
administered  wisely  and  justly,  and  Ger- 
many's prosperity  so  increased  by  leaps 
and  bounds  that  the  whole  nation  stood 
behind  the  autocratic  forms  which  had 
produced  such  results.  The  same  thing 
happened,  however,  as  always  happens 
under  such  a  form  of  Government.  First 
came  peace,  then  prosperity,  then  efficiency, 
then  self-satisfaction,  ambition  and  greed. 
Reaching  this  last  stage,  the  world  war  urns 
the  inevitable  result,  teaching  mankind  that 
no  matter  how  efficient  autocracy  may  he,  the 
only  safe  form  of  Government  to  rely  upon 
in  the  future  is  government  by  the  Majority, 
working  to  the  end  of  making  the  majority  as 


[15] 


THE    INDUSTRIAL    REPUBLIC 

efficient  as  possible.  To  prove  that  results 
have  been  the  same  in  the  past  where 
autocracy  ruled,  we  have  but  to  go  back  in 
history  to  the  Roman  Empire,  the  French 
under  Louis  XIV,  and  under  Napoleon,  and 
every  other  large  nation  in  the  past  which 
has  followed  in  the  same  footsteps.  In  all 
such  cases  the  ruling  party  has  seen  the 
"handwriting  on  the  wall"  too  late  to  let 
go  gradually,  a  revolution  results  and  de- 
stroys in  a  large  measure  the  efficiency  and 
prosperity  previously  built  up. 


[16] 


THE    INDUSTRIAL    REPUBLIC 


CHAPTER  II 

Genesis  and  Development  of  the 
Labor-Capital  Opposition 

Tliere  is  sucli  a  similarity  between  the 
evolution  of  political  government  and  in- 
dustrial management  that  it  is  instructive 
to  go  back  to  the  origin  of  Industry,  tracing 
its  development  to  the  present  stage. 

First,  man  existed  on  the  bounty  of 
nature,  hunting  and  fishing,  and  by  his 
labor  alone  acquired  those  things  which  were 
necessary  to  sustain  life.  With  this  method 
of  living,  each  man  required  large  areas  of 
land  to  support  him,  and  the  world  could, 
therefore,  support  a  very  small  population. 
Man  soon  found  however,  that  he  could 
cultivate  the  ground,  produce  food,  and  that 
he  could  raise  animals  also,  instead  of 
depending  only  on  what  nature  produced 


[171 


THE    INDUSTRIAL    REPUBLIC 

unassisted.  This  enabled  a  much  larger 
population  to  exist  on  the  same  area  of  land. 
It  was  next  found  that  productive 
capacity  would  be  further  increased  by 
subdivision  of  labor,  some  men  doing  one 
thing  and  some  another,  and  exchanging 
the  products  of  their  labor.  As  soon  as  the 
condition  developed  whereby  a  man  was 
able  to  produce  more  than  he  was  himself 
able  to  consume,  he  had  the  choice  of 
ceasing  to  work  as  soon  as  his  wants  were 
supplied,  or  continuing  to  work  and  saving 
a  portion  of  the  product  of  his  labor.  The 
hunter  saved  some  of  the  animals,  fish,  and 
fruit  which  he  secured  in  the  summer, 
dried  them  and  put  them  away  for  the 
winter.  When  he  started  to  cultivate  the 
ground,  he  saved  and  stored  away  the 
surplus  to  tide  him  over  until  the  next 
harvest.  After  he  gathered  the  harvest,  he 
industriously  devoted  his  spare  time  to 
making  tools  with  which  he  could  produce 
crops  in  larger  quantities  with  less  labor. 


[18] 


ORIGIN  OF  LABOR  M.  CAPITAL 

This  gave  rise  to  Capital  which  is  always 
the  result  of  and  has  its  origin  in  the  Savings 
of  labor.  Some  men  did  not  save  but 
ceased  to  work  beyond  the  point  of  barely 
taking  care  of  their  necessities.  Others 
continued  to  work  both  for  their  physical 
and  material  benefit,  and  out  of  their 
savings  created  things  necessary  for  suste- 
nance and  tools  and  machinery  with  which 
to  increase  their  productive  capacity.  These 
savings  became  what  we  now  know  as 
"capital."  The  use  of  this  capital  by  labor 
resulted  constantly  in  increased  production 
at  less  expenditure  of  labor.  The  savings 
of  this  combined  effort  was  again  applied 
still  further  to  increase  production,  enabling 
the  earth's  surface  to  support  a  constantly 
increasing  population,  until  now  it  is  so 
densely  populated  that  destruction  of  capital 
would  result  in  world-wide  starvation. 
Therefore,  in  Industry  today  it  is  absolutely 
essential  that  capital  and  labor  go  hand  in 


119] 


THE    INDUSTRIAL    REPUBLIC 

hand  to  produce  the  best  results,  in  which 
they  have  a  common  interest. 

In  the  old  days  when  tribes  existed  on 
the  bounty  of  nature,  as  the  population 
increased,  it  was  found  necessary  for  one 
tribe  to  fight  another  to  kill  off  the  popu- 
lation in  order  that  there  might  be  enough 
food  for  the  remainder.  It  was  popularly 
considered  that  wars  were  an  economic 
good,  as  otherwise  the  standard  of  living 
and  subsistence  would  go  constantly  down 
as  the  population  increased.  The  introduc- 
tion of  capital  has  destroyed  this  theory 
and  we  now  know  that  it  is  the  use  of 
capital,  combined  with  labor,  that  is  the 
key  to  the  solution  of  an  increase  both  in 
the  population  and  in  the  higher  standards 
of  living. 

Capital,  be  it  reiterated,  is  nothing  but 
the  Savings  of  labor,  and  its  logical  function 
is  to  be  put  at  the  disposal  of  mankind  to 
be  combined  with  labor  to  make  that  labor 
more  productive.     In  other  words,  capital 


[20] 


ORIGIN  OF  LABOR  w.  CAPITAL 

should  be  put  at  the  disposal  of  those  who 
labor,  for  the  benefit  of  the  community,  and 
the  owners  of  that  capital  should  be  entitled 
to  a  fair  reward  for  its  use.  It  is  evident 
that  this  is  something  entirelj^  different  from 
the  view  that  humanity  should  loan  its 
labor  to  the  man  who  owns  capital  for 
the  benefit  of  capital,  and  it  is  the  difference 
between  these  two  ideas  that  is  to  a  large 
extent  at  the  bottom  of  the  industrial  unrest  of 
today. 

To  return  to  the  progress  of  industry: 
As  we  pass  from  the  agricultural  stage  to 
the  manufacturing  stage,  it  becomes  advis- 
able to  divide  laborers  into  groups,  part  to 
do  the  farming,  part  to  manufacture  the 
tools  and  machines  necessary  to  increase 
production,  and  part  for  special  services, 
such  as  doctors,  ministers,  lawyers,  etc., 
render.  This  started  the  so-called  crafts 
where  different  groups  of  men  specialized 
in  their  particular  craft  or  trade,  and  by 
study  and  practice  became  very  efficient  in 


[ill 


THE    INDUSTRIAL    REPUBLIC 

these  lines,  making  the  tools  necessary  and 
exchanging  these  tools  for  the  products  of 
the  labor  of  others.  These  men  combined 
their  own  capital  with  their  own  labor  and 
disposed  of  the  product  to  the  best  advant- 
age of  themselves. 

In  this  evolution  some  men  saved  a  great 
deal  more  than  others.  Tools  became  more 
highly  specialized  and  more  costly  in  time 
and  labor,  and  only  those  who  had  saved 
considerable  were  able  to  own  these  tools. 
The  men  that  had  these  tools  were  able  to 
produce  cheaper  than  those  who  had  not, 
which  caused  the  latter  to  find  their  busi- 
ness unprofitable,  as  they  could  not  get 
sufficient  returns  in  competition  to  give 
them  an  adequate  return  for  their  labor. 
These  men  in  the  meantime,  however,  had 
become  so  skilled  in  their  crafts  that  they 
could  combine  their  labor  with  the  capital 
of  others  and  still  make  more  than  engaging 
in  some  other  occupation  which  did  not 
require  capital. 


[22] 


ORIGIN  OF  LABOR  «».  CAPITAL 

From  this  grew  the  wage  system  whereby  a 
man  sold  his  labor  for  a  fixed  amount  as 
being  the  most  convenient  and  easy  way  of 
getting  his  share  of  the  combined  effort.  The 
lack  of  control  of  capital  on  his  part  placed 
him  at  a  disadvantage,  and  in  order  to 
protect  himself  and  get  a  fair  share  of  the 
product  of  his  labor,  he  combined  with 
others  in  a  similar  position  and  this  has 
resulted  in  the  formation  of  trade  unions 
for  the  mutual  benefit  of  those  who  work 
for  wages.  The  result  of  this  was  that  he 
built  up  a  community  of  interest  with 
others  of  his  class,  and  by  force  of  numbers 
was  able  to  get  better  wages  and  better 
working  conditions  than  would  otherwise 
have  been  the  case.  A  natural  reaction 
was  the  creation  of  a  community  of  interest 
among  owners  of  capital  and  tliey  in  turn 
joined  to  protect  their  capital  or  savings,  to 
see  that  it  also  had  a  fair  return  from  the 
combined  efforts  of  capital  and  labor.  This 
resulted  in  the  opposition  of  the  two  classes. 


m 


THE    INDUSTRIAL    REPUBLIC 

Labor  and  Capital,  each  more  or  less  sharply 
defined,  each  dependent  upon  the  other, 
and  each  trying  to  see  that  it  got  its  fair 
share  of  the  results  of  the  combined  effort. 
For  several  centuries  past  the  proportion 
of  wage  earners  who  combine  their  labor 
with  other  people's  capital  has  been  con- 
stantly increasing  over  the  people  who 
combine  both  capital  and  labor  in  their  own 
supervision,  such  as  the  farmers,  profes- 
sional men,  and  others,  until  at  the  present 
time  an  extremely  large  portion  of  laborers 
are  wage  earners  with  little  if  any  capital 
at  their  own  command. 

In  the  beginning  the  division  of  the 
product  of  industry  between  those  who 
furnished  the  capital  and  those  who  fur- 
nished the  labor  was  relatively  a  simple 
matter,  as  the  groups  working  together 
were  very  small.  The  men  who  furnished 
the  capital  were  working  with  the  others, 
and  understood  the  wants  and  needs  of 
labor,  and  were  in  a  position  to  accurately 


[24] 


ORIGIN  OF  LABOR  Fs.  CAPITAL 

measure  the  service  rendered  by  those  who 
furnished  the  labor.  But  in  order  to  in- 
crease production  and  lower  costs,  labor 
became  further  and  further  subdivided  and 
industries  changed  from  small  units  to  very 
large  units,  concentrated  in  centers  of  popu- 
lation and  in  convenient  locations  with 
reference  to  power,  the  gathering  of  raw 
materials  and  distribution  of  finished  pro- 
duct. Industries  of  this  nature  so  much 
better  served  the  community  that  others 
were  soon  at  a  disadvantage  and  went  out 
of  business. 

The  efficiency  of  this  so-called  Mass 
Production  or  Big  Business  organization  of 
industry  produced  so  much  greater  results 
that  those  whose  capital  was  invested  in 
this  form  of  organization  received  very 
large  returns,  and  the  owners  of  this  cap- 
ital, having  much  more  than  sufficient  to 
support  themselves,  either  for  the  present 
or  future,  found  that  work  of  any  nature 
for  them   became   unnecessary   and   many 


[i5] 


THE    INDUSTRIAL    REPUBLIC 

of  them  simply  continued  to  loan  their 
capital  and  live  upon  the  returns  from  this, 
i.  e.,  instead  of  running  the  business  them- 
selves, they  hired  other  men  to  manage  the 
business  for  them. 

These  men  were  hired  to  perforTn  labor, 
which  had  formerly  been  done  by  the  capital- 
ist, this  being  to  look  after  and  increase  the 
share  which  capital  should  have  in  the  reward. 
In  other  words,  they  were  laborers  hired  to 
manage  other  laborers,  but  not  with  the 
same  community  of  interest  with  the  other 
laborers,  and  their  reward  was  to  be  meas- 
ured by  the  amount  that  they  could  increase 
the  capital  which  they  were  hired  to  man- 
age. In  consequence,  lack  of  interest  in  the 
collective  result  of  the  industry  outside  of 
the  wage  received  (which  seemed  to  bear  no 
particular  relation  to  the  success  of  the 
industry  as  a  whole),  soon  seized  upon  the 
rank  and  file  of  industrial  employees.  No 
longer  having  any  acquaintance  with  the 
men  who  labored  in  industry,  soon  caused 


[iG] 


ORIGIN     OF     LABOR  «;s.  CAPITAL 

a  lack  of  interest  on  the  part  of  those  who 
suppHed  the  capital.  The  employees,  feeling 
their  wage  reasonably  assured,  started  to 
spend  all  of  their  wages  for  current  needs 
and  did  not  save  for  the  future. 

Such  has  been  the  genesis  and  develop- 
ment of  the  labor-capital  opposition.  The 
result  of  this  evolution  has  been  to  create  a 
class  of  capitalists,  who  do  not  work,  and  a 
class  of  laboring  men  who  do  not  save  and 
who  have  no  capital.  It  must  be  perfectly 
evident  to  anyone  that  there  can  be  no 
community  of  interest  whatsoever  between 
these  two  classes,  and  the  division  of  a 
population  into  two  classes  of  this  nature 
results  in  endless  friction  and  continual  col- 
lective bargaining,  neither  side  being  satis- 
fied with  the  ever- varying  results. 

Thence  follow  strikes,  lockouts  and  loss  of 
product,  as  the  capitalist  who  does  not 
work  always  desires  to  have  as  much  reward 
as  the  capitalist  who  does  work,  and  the 
laboring   man   who   saves   nothing   always 


[27] 


THE    INDUSTRIAL    REPUBLIC 

desires  to  live  as  well  and  be  as  well  taken 
care  of  in  the  future  as  the  man  who  saves 
a  part  of  the  results  of  his  labor  for  a  rainy 
day.  Neither  of  these  desires  are  right,  but 
are  merely  special  privileges  which  can  only 
be  granted  by  injustice  to  others.  As  there 
never  can  be  any  mutual  ground  between 
the  capitalist  who  does  not  work  and  the 
laborer  who  does  not  save,  the  power  of 
either  one  of  these  groups  to  obtain  for 
itself  special  privileges,  to  which  it  has  no 
right,  should  be  curbed. 

The  tendency  of  combinations  of  capital 
and  combinations  of  labor  to  build  up  large 
powerful  bodies,  each  one  for  its  own 
interest,  is,  therefore,  undemocratic  and  un- 
American,  and  in  the  interests  of  all  there 
should  be  substituted  for  this  something 
which  would  increase  the  incentive  for 
labor  to  save  more,  which  in  turn  would 
cause  it  to  produce  more.  We  should  also 
endeavor  to  see  that  capital  which  does  not 
labor  should  be  restricted  in  its  ability  to 


[28] 


ORIGIN  OF  LABOR  rs.  CAPITAL 

acquire  more  than  the  current  market  rate 
for  the  use  of  its  capital,  and  remove  from 
such  capital  any  possibility  of  being  used  on 
the  principle  of  "Might  makes  Right." 
Increased  production  and  the  ability  of 
the  earth  to  support  an  increasing  popula- 
tion depends  entirely  upon  both  labor  and 
capital  working  together.  Economically 
therefore,  they  have  a  common  interest  and 
they  should  be  so  organized  that  this  com- 
mon interest  is  so  apparent  to  both  that 
they  are  working  together  in  harmony. 


[29] 


THE    INDUSTRIAL    REPUBLIC 


CHAPTER  III 

Present  Status  of  the  Labor-Capital 
Opposition 

Examining  the  typical  form  of  large  In- 
dustrial Organizations  of  today,  we  find  a 
very  large  plant  investment,  often  running 
into  many  millions  of  dollars  in  value,  for 
purposes  of  production  and  distribution. 
The  capital  which  this  represents  has  been 
furnished  often  by  thousands  of  different 
people,  who  have  presumably  placed  their 
savings  in  this  particular  enterprise  because 
they  thought  that  their  savings  would  bring 
a  higher  return  when  invested  here  than 
elsewhere. 

Such  investors  may  be  divided  into  three 
classes;  first,  those  who  have  invested  in  the 
form  of  a  straight  loan  to  the  business,  tak- 
ing a  mortgage  on  the  plant  as  security. 


[31] 


THE    INDUSTRIAL    REPUBLIC 

The  reward  for  the  use  of  this  capital  is 
usually  a  small  interest  rate  which  is  paid 
out  of  the  profits  of  the  business,  and  if 
there  are  no  profits  they  have  asked  that 
the  plant  be  sold  and  that  they  be  paid  out 
of  the  sale  of  the  plant,  which  necessitates 
the  discontinuance  of  the  business.  In  this, 
capital  takes  very  little  risk.  Such  investors 
are  usually  known  as  bond  holders. 

Second;  there  are  those  who  lend  their 
capital  to  the  business,  taking  all  of  their 
return  out  of  the  profits  of  the  business  and 
who  insist  that  their  claims  have  preference 
before  lending  their  capital,  and  with  this 
preference  are  satisfied  to  take  a  fixed 
return  out  of  the  profits,  allowing  those  who 
do  not  have  this  preference  to  take  the 
balance.  These  are  known  as  preferred  stock 
holders. 

Third;  there  are  those  who  loan  their 
capital  to  the  business,  agreeing  to  take  as 
their  share  only  what  is  left  after  the  wages 
and  all  bills  are  paid,  and  the  bond  holders 


[32] 


LABOR     AND     CAPITAL     TODAY 

and  preferred  stock-holders  taken  care  of. 
These  are  usually  known  as  common  stock- 
holders, and  as  they  take  the  largest  amount 
of  risk,  they  usually  are  in  control  of  the 
operation  of  the  Industry  and  are  the  most 
vitally  interested  in  its  success. 

The  men  who  supply  the  labor  furnish 
their  services  at  a  fixed  rate  and  receive 
their  return  either  in  the  form  of  wages  or 
salary.  They  are  usually  paid  at  so  much 
per  piece  for  the  articles  produced,  or  so 
much  for  the  time  which  they  work,  which 
amount  is  also  based  upon  the  amount  which 
they  are  expected  to  produce  within  a  given 
time.  Here  we  run  across  the  mistaken  idea 
that  a  man's  time  is  worth  so  much  money, 
regardless  of  what  he  produces.  The  incon- 
sistency of  such  an  argument  is  easily 
demonstrated  in  the  fact  that  the  Industry 
can  only  sell  the  products  of  labor  and  not 
the  time  used  in  that  production.  There- 
fore, there  is  no  sound  economic  reason  for 
paying  for  time,  and  wages  must  be  based 


[S3] 


THE    INDUSTRIAL    REPUBLIC 

entirely  upon  the  amount  produced.  The 
fact  that  it  is  expressed  in  units  of  time  is 
incidental  and  not  fundamental.  Time  is 
for  use:  it  is  not  for  sale. 

Now  we  envisage  all  who  supply  either 
capital  or  labor  and  witness  them  united 
and  working  together  in  production.  The 
products  are  distributed  and  the  reward 
comes  in.  If  the  Industry  is  going  to  con- 
tinue, a  certain  amount  of  the  reward  has 
to  be  used  to  replace  the  raw  materials  and 
equipment  which  were  used  up  in  making 
the  finished  product,  and  the  balance  is 
either  to  be  invested  in  an  expansion  of  the 
business  or  divided  as  nearly  as  possible 
between  the  capital  and  labor  used  in  pro- 
duction in  direct  proportion  to  the  service 
rendered. 

Theoretically  there  should  be  no  sum 
expended  for  labor  or  for  interest  or  divi- 
dends until  the  products  of  industry  have 
been  sold  and  money  received  in  exchange. 
But  this  is  obviously  impossible  in  modern 


[34] 


LABOR     AND     CAPITAL     TODAY 

industry,  since  it  is  often  months  or  years 
before  some  of  the  capital  invested  is  sold 
as  finished  product,  and  often  many  months 
before  the  article  in  which  labor  is  expended 
is  sold  or  exchanged.  Owing  to  the  large 
number  of  men  who  have  not  saved  suffi- 
ciently to  exist  in  the  meantime,  an  esti- 
mate has  to  be  made  in  advance  upon  what 
the  results  of  the  business  are  going  to  be 
so  that  these  may  get  an  advance  return. 
It  is  impossible  to  make  the  wage  a  full 
payment  to  labor  and  at  the  same  time  a 
fair  payment,  but  we  have  come  as  a 
matter  of  practice  to  do  this  very  thing  by 
making  the  wage  payment  the  full  return 
for  labor's  share  in  Industry. 

What  is  the  result  ?  The  laboring  man 
says  either  he  can't  or  he  won't  take 
any  financial  risk  on  the  successful  and 
profitable  operation  of  the  Industry,  but  he 
will  take  his  wage  as  his  full  return  for  his 
share  in  the  partnership.  It  follows  that 
those  who  supply  the  common  capital  of 


[35] 


THE    INDUSTRIAL    REPUBLIC 

the  Industry  assume  either  from  choice  or 
from  necessity,  all  the  risk  and  will  quite 
naturally  claim  everything  produced  in  ex- 
cess of  the  fixed  obligation  to  labor  in  the 
form  of  wages,  and  the  fixed  returns  to 
other  capital  which  is  safeguarded  against 
real  risk. 

So  long  as  labor  takes  this  stand,  the 
owners  of  common  capital  are  entirely  justi- 
fied in  their  position,  and  the  share  which 
labor  has  received  in  the  past,  based  upon 
its  acceptance  of  the  "wage  in  full,"  has  been 
its  fair  reward.  If  labor  were  to  take  the 
same  attitude  in  the  future,  those  who 
supply  common  capital  are  entitled  to  con- 
tinue to  receive  the  same  proportion  of  the 
reward  of  Industry  that  they  have  received 
in  the  past,  up  to  a  certain  point. 

All  know  that  capital  has  been  so  well 
rewarded  in  many  instances  by  this  arrange- 
ment, that  those  who  provide  the  common 
capital,  realizing  the  power  which  this  gives 
them,  are  often  apt  to  say  to  labor  that 


[36] 


LABOR     AND     CAPITAL     TODAY 

whether  labor  wishes  to  take  a  risk  with 
them  or  not,  that  they  don't  wish  labor  to 
have  the  opportunit}^  of  doing  so.  This 
attitude  is  entirely  wrong.  Labor  may  not 
have  any  capital  to  risk,  but  it  is  risking  all 
it  has  to  risk,  i.  e.,  its  labor,  and  its  ability 
to  get  the  best  results  from  this  labor  is 
bound  up  to  a  large  extent  with  the  per- 
manencj^  and  profitableness  of  the  business. 
Labor  may  not  risk  a  proportionately  large 
amount  based  upon  the  productiveness  of 
what  it  lends,  but  it  does  risk  a  very  large 
amount  in  proportion  to  what  it  has  to 
lend.  It  is,  therefore,  only  a  matter  of  mere 
justice  that  if  labor  has  received  the  current 
wage  and  capital  at  the  end  has  received  the 
current  rate  of  interest,  that  any  surplus 
beyond  this  must  necessarily  have  been  created 
by  the  combined  use  of  capital  and  laboVy 
and  should  be  divided  between  the  two  in  some 
proportion  and  not  go  entirely  to  Capital 
alone. 

With  this  incentive  the  increase  in  quan- 


[37] 


THE    INDUSTRIAL    REPUBLIC 

tity  and  efficiency  of  production  will  provide 
means  for  capital  to  share  a  percentage  of 
earnings  with  labor  without  net  loss  to  itself. 

From  all  sides  today  we  hear  the  economic 
axiom  that  the  only  way  to  keep  wages  at 
their  present  high  level  or  increase  them  in 
the  future  is  to  become  more  efficient  and 
by  so  doing,  to  increase  production. 

When  profit-sharing  or  joint  stock  owner- 
ship with  labor  becomes  a  more  established 
custom,  companies  who  do  not  offer  such 
opportunities,  will  not  only  find  it  difficult 
to  obtain  new  men  of  the  right  type,  but 
will  not  be  able  to  retain  those  whom  they 
now  have.  The  advantage  and  good-will 
accrue  to  those  who  first  adopt  it. 

Assuming  the  condition  to  prevail  uni- 
versally that  labor  should  receive  its  full 
payment  in  wages  and  capital  take  all  the 
excess,  the  natural  consequence  would  be  to 
divide  Industry  into  two  classes,  one  whose 
interest  is  entirely  in  wage,  and  the  other 
entirely   in   profits.     The   first   class   must 


[38] 


LABOR  AND  CAPITAL  TODAY 

realize  that  so  long  as  the  business  is  success- 
ful enough  to  obtain  the  capital  necessary 
to  continue  its  operation,  any  further 
profits  are  detrimental  to  the  interests  of 
labor  and,  therefore,  they  should  strive  to 
have  their  wage  so  high  that  excess  profits 
would  not  be  possible.  On  the  other  hand 
those  supplying  the  capital  would  realize 
that  so  long  as  sufficient  labor  can  be  ob- 
tained to  operate  the  business,  the  wage 
must  be  kept  as  low  as  possible  in  order 
that  the  profits  might  be  larger.  This  is  the 
condition  which  generally  prevails  in  Industry 
today,  and  by  having  a  difference  of  interests 
rather  than  a  community  of  interest  between 
the  two  parties,  conditions  promoting  friction 
and  unrest  are  always  present.  This  condition 
can  only  be  overcome  by  bringing  about  a  com- 
munity of  interest. 

One  of  the  reasons  labor  heretofore  has 
not  wished  to  take  a  risk  in  the  business  in 
relation  to  its  reward  has  been  the  feeling  on 
the  part  of  labor  that  it  has  no  voice  in 


[;]9] 


THE    INDUSTRIAL    REPUBLIC 

the  management  of  the  business.  It  is  not 
in  position  to  affect  the  profits.  Therefore, 
it  should  not  be  called  upon  to  take  a 
speculative  interest  in  the  business,  but 
should  make  those  in  control  take  all  the 
risk.  To  very  many  workers  this  is  a  very 
satisfactory  arrangement,  but  there  are 
always  some  who  have  saved  a  little,  who 
would  be  ready  if  they  had  the  opportunity, 
to  risk  their  savings  with  the  other  capital, 
and  there  are  others  who  think  that  risking 
their  labor  alone  when  they  have  no  capital 
is  sufficient  to  justify  their  having  "a  say" 
in  the  selection  of  representatives  to  admin- 
ister the  enterprise.  There  is  certainly 
justice  in  this  contention  which  cannot  be 
brushed  aside.  It  must  be  recognized  and 
fair  representation  given.  While  it  is  difficult 
to  determine  exactly  what  fair  representation 
should  be,  we  must  attempt  to  provide  for  it 
as  far  as  possible  and  not  dismiss  the  idea  as 
being  impractical.  The  manifest  injustice  of 
no  representation  must  be  discontinued. 


[40] 


THE    INDUSTRIAL    REPUBLIC 


CHAPTER  IV 

Clues  to  the  Solution 

To  recognize  the  opposition  of  Labor  to 
Capital  in  the  present  organization  of  in- 
dustry and  to  remedy  it  requires  a  progressive 
change  in  industrial  organization  which  can 
he  undertaken  in  our  Country  with  greater 
safety  than  in  almost  any  other. 

Our  problem  in  Industry  today  is  very 
similar  to  that  which  confronted  our  fore- 
fathers in  1776  and  1783.  At  that  time  we 
found  our  people  being  taxed  without  repre- 
sentation by  a  foreign  government,  and  the 
distribution  of  part  of  the  product  of  their 
labor  being  made  by  others  many  miles 
away  with  whom  they  had  no  common 
interest. 

Today  we  find  large  numbers  of  working 
men   having  their   wages   fixed   by  people 


[411 


THE    INDUSTRIAL    REPUBLIC 

who,  while  they  have  some  interests  in 
common,  have  a  great  many  interests  op- 
posed. We  also  find  that  often  the  share 
of  reward  between  those  who  labor  and 
those  who  supply  the  capital  is  not  fairly 
divided.  It  was  the  task  of  our  forefathers 
to  see  that  all  parties  having  an  interest  at 
stake  were  represented  in  the  Government, 
and  that  the  privileges  and  rewards  created 
were  evenly  distributed.  They  realized  that 
justly  to  make  an  even  distribution  of 
privileges  each  must  do  his  share  to  produce 
the  privileges.  In  other  words,  for  every  'priv- 
ilege there  is  a  corresponding  duty. 

A  group  of  representative  men  were 
selected  from  among  the  people  to  form  a 
constitution  which  should  be  the  funda- 
mental law  by  which  the  inhabitants  of  the 
country  should  be  ruled.  How  they  met 
this  problem  is  shown  by  our  Federal 
Constitution,  and  the  wisdom  of  their  work 
is  evidenced  by  the  long  period  of  years 
under  which  the  people  have  been  governed 


[42] 


CLUES     TO     THE     SOLUTION 

by  this  document,  the  large  number  of 
people  now  governed  by  it,  and  also  the 
model  which  it  has  been  for  other  lawgivers. 

An  analysis  of  the  underlying  principle  of 
the  Federal  Constitution  affords  us  the  surest 
guide  which  we  have  for  solving  the  present  in- 
dustrial problem.  This  principle  is  that  it  is 
a  government  by  the  people,  based  upon 
the  equality  of  individuals,  and  that  human 
rights  stand  first  and  all  other  rights  second- 
ary, whether  they  be  from  birth,  education, 
wealth,  or  from  other  sources,  at  the  same 
time  recognizing  property  rights. 

By  enforcing  the  duty  of  pajdng  taxes 
sufficient  security  is  given  to  enable  the 
people  to  get  such  additional  capital  as 
they  may  require  at  even  better  than  the 
current  rate  of  interest,  and  at  the  same 
time,  give  it  no  voice  in  the  government  as 
capital.  Without  the  power  of  taxation  or 
compulsory  savings,  capital  could  not  be 
obtained  without  representation  or  addi- 
tional security  of  some  sort,  and  it  would 


[43] 


THE    INDUSTRIAL    REPUBLIC 

have  to  have  direct  representation  in  the 
Government.  It  is  the  desire  of  the  workers 
that  this  same  condition  should  exist  in 
industry.  In  order  to  obtain  this  condition 
by  honest  methods,  sufficient  security  must 
be  given  to  capital  required  in  the  Industry, 
to  secure  it  at  the  current  rate  of  interest, 
without  necessarily  giving  it  a  voice  in  the 
management  to  insure  its  safety. 

The  only  possible  way  to  do  this  and  still 
have  the  workers  in  control  of  the  industry 
the  same  as  they  are  in  control  of  the 
Government  and  with  the  same  kind  of 
equality  of  representation,  would  be  for  the 
workers  to  save  and  jointly  pledge  their 
savings  to  the  development  of  the  business 
so  that  other  capital  which  they  require 
is  satisfactorily  safeguarded  to  such  an 
extent  that  a  sufficient  number  of  people 
will  loan  the  required  capital  to  the  industry 
without  requiring  any  representation.  Un- 
til the  workers  are  able  and  willing  to  do 
this,  or  can  be  compelled  by  a  majority  of 


[44] 


CLUES     TO     THE     SOLUTION 

their  own  people  to  do  so,  it  is  quite  obvious 
that  capital  must  have  representation.  If 
labor  does  not  wish  to  assume  any  risk  at 
all,  or  is-  not  able  to  do  so,  then  capital 
must  be  in  control  of  the  management, 
which  position  it  now  occupies. 

Capital  should  not  assume,  however,  that 
because  the  majority  of  workers  cannot  or 
do  not  w^ish  to  invest  their  savings  in  the 
enterprise,  that  none  of  them  should  be 
permitted  to  do  so.  It  should  encourage 
and  offer  facilities  for  those  who  labor  and 
save  to  become  interested  in  the  operation 
of  the  business  and  distribution  of  the 
profits.  It  cannot  be  expected  that  capital, 
which  is  already  invested  in  a  business, 
should  relinquish  control  of  that  business 
until  it  is  safe-guarded  for  the  future,  as  it 
has  not  the  ability  to  detach  itself  from  the 
enterprise  once  it  finds  itself  in  an  un- 
satisfactory position,  the  same  as  the  man 
who  labors  can  detach  himself  from  the 
enterprise  at  will. 


[4: 


THE    INDUSTRIAL    REPUBLIC 


CHAPTER  V 

Rights  Involve  Duties 

There  is  one  fundamental  economic  theory 
which  in  the  past  capital  has  either  been 
ignorant  of,  or  has  totally  ignored.  This  is 
the  relation  of  human  rights  to  property 
rights.  Capital  must  come  to  realize  that 
human  rights  come  first  and  property  rights 
second.  The  law  recognizes  this  to  the 
extent  of  making  wages  the  first  lien  on  an 
industry  before  interest  and  capital  are 
recognized.  It  is  also  recognized  that  after 
labor  has  received  the  current  market  wage, 
and  this  has  preference,  that  it  should  be 
entitled  to  no  further  rights  until  capital 
has  received  the  current  rate  of  interest  for 
its  use. 

The  desires  of  the  working  men  have  been 
limited   very   largely   to   four   points;    (1) 


[47] 


THE    INDUSTRIAL    REPUBLIC 

Higher  Wages,  (2)  Shorter  Hours,  (3) 
Representation  in  the  Management,  and 
(4)  Share  in  the  Profits. 

Tlie  latter  two  can  he  justly  recognized  only 
when  the  workers  are  "prepared  to  take  the 
responsibilities  and  duties  safeguarding  the 
rights  of  the  capital  invested  in  the  Industry, 
the  same  as  they  do  as  citizens  in  protecting 
the  Government  by  paying  taxes.  If  the 
framers  of  the  Constitution  correctly  solved 
the  problem  of  government  politically, 
then  we  are  right  in  the  belief  that  the 
problem  of  Industrial  Management  is  an- 
alogous to  that  which  they  faced,  save  that 
as  applied  to  Industry  we  must  determine 
the  logical  steps  to  pursue  in  changing  the 
present  industrial  management  over  to  the 
Federal  form,  with  just  regard  for  the  rights 
of  both  capital  and  labor. 

The  first  step  is  to  establish  an  Industrial 
citizenship,  creating  equality  of  powers  of 
the  individual  citizens  to  choose  repre- 
sentatives to  run  the  business.   There  must, 


148] 


RIGHTS     INVOLVE     DUTIES 

of  necessity  for  good  business,  be  certain 
restrictions  for  the  qualification  of  citizen- 
ship. These  restrictions  should  only  be 
placed  upon  the  age  and  intelligence  of  the 
individual  to  insure  a  majority  which  would 
be  able  to  safeguard  the  best  interests  of  all. 
These  limitations  should  exist  only  so  long 
as  the  individual  did  not  qualify,  and  every 
opportunity  should  be  given  him  to  be 
able  to  qualify  as  soon  as  possible,  so  that 
all  might  have  the  opportunity  of  citizen- 
ship if  they  are  ready  to  assume  its  duties. 
These  citizens  would  have  the  power  to 
elect  representatives  who  should  govern  the 
policy  of  the  business  to  the  extent  of  safe- 
guarding their  human  rights.  Only  as  they 
provide  their  own  underlying  capital  for  the 
business,  may  they  gain  control  to  the  extent 
of  being  able  to  limit  the  capitalist's  rights. 
This  would  mean  joint  control  by  repre- 
sentation of  both  labor  and  capital  until 
such  time  as  this  point  had  been  reached. 
Until  that  time  representative  control  by 


(491 


THE    INDUSTRIAL    REPUBLIC 

the  workers  should  only  be  to  the  extent  of 
protecting  their  human  rights  while  the 
control  of  property  rights  should  remain 
with  those  who  furnish  the  property. 

In  order  to  conform  to  the  ideal  of 
management  which  we  have  in  our  National 
Government,  it  would  be  necessary  either 
that  a  certain  portion  of  the  wages  paid, 
be  automatically  reinvested  in  the  business 
in  a  way  similar  to  that  with  which  we 
raise  taxes,  or  else  that  the  excess  profits 
of  the  company  after  wages  and  current 
interest  rates  on  capital  have  been  paid, 
should  be  divided  and  the  share  of  labor 
be  reinvested  in  the  company  at  the  same 
value  as  the  capital  already  similarly  in- 
vested. So  long  as  labor  is  in  position  where 
it  has  to  take  its  share  in  form  of  wages, 
which  are  anticipated  profits,  or  as  long  as 
labor  is  unable  to  have  savings  to  make 
good  any  losses  which  capital  may  sustain 
in  the  operation  of  the  business,  just  so 
long   should    the    control   of   that    capital 


[50] 


RIGHTS   INVOLVE    DUTIES 

remain  with  the  owners  of  it.     Any  other 
solution  would  be  confiscation  and  injustice. 


151] 


THE    INDUSTRIAL    REPUBLIC 


CHAPTER  VI 

The  Industrial  Republic 

Before  attempting  an  advance  in  this 
direction  it  would  obviously  be  necessary 
to  sever  all  connections  with  other  organiza- 
tions whose  functions  might  interfere  or  con- 
flict with  those  of  the  governing  body  elected 
by  the  workmen  and  management.  Only 
by  clearing  our  decks  for  action  in  such 
manner  can  we  build  up  the  confidence 
between  labor  and  management  which  is 
necessary  for  co-operation  and  harmony. 

If  we  are  to  form  an  Industrial  Republic 
it  is  logical  that  we  should  study  the 
organization  and  workings  of  the  Political 
Republic,  and  the  United  States  Govern- 
ment affords  this  opportunity.  In  defining 
a  plan  of  organization  along  these  lines,  the 
first  step  is  the  determination  of  the  limita- 


53] 


THE    INDUSTRIAL    REPUBLIC 

tions  of  citizenship.  There  must  be,  1st,  a 
certain  age  hmit  within  which  it  is  presumed 
a  man  should  ordinarily  have  acquired 
sufficient  intelligence  to  be  expected  to  use 
good  judgment;  2nd,  knowledge  of  a  com- 
mon language,  and,  3rd,  a  sufficient  time  in 
the  Industry  to  become  familiar  with  its 
needs.  These  Citizens  should  then  elect 
representatives  to  form  a  management  to 
insure  their  human  rights,  such  as  fair 
market  wage,  fair  working  conditions,  and 
other  matters  pertaining  to  the  safety  and 
welfare  of  the  people  engaged  in  the  In- 
dustry. In  order  to  protect  the  Industry 
against  radicalism,  and  taking  steps  hastily, 
which  might  afterwards  have  to  be  cor- 
rected, we  could  well  adopt  the  plan  of  our 
forefathers  and  establish  two  bodies  and 
make  it  necessary  for  legislation  to  pass  a 
majority  of  each  of  these  bodies  and  also 
the  executive  body. 

Persons  eligible  to  serve  as  representatives 
would   need   still   further   qualifications   as 


34] 


THE    INDUSTRIAL    REPUBLIC 

regards  age  and  length  of  service,  than 
would  be  requisite  for  mere  citizenship. 
This  was  found  very  necessary  for  the 
safety  of  our  political  republic  in  its  early 
days  and  is  doubly  necessary  for  an  Indus- 
trial Republic,  for  the  following  reason: 

A  Government  by  having  the  power  to 
fix  laws  for  immigration  and  tariffs  or  em- 
bargoes on  importation  of  materials,  can 
artifically  control  the  supply  of  labor  and 
capital  of  the  Nation,  to  prevent  an  inrush 
of  either  one  upsetting  the  balance,  in  case 
it  makes  mistakes  in  legislation.  In  other 
words,  it  can  stave  off  the  disastrous  results 
of  unwise  legislation  and  correct  its  mis- 
takes. With  Industry,  on  the  other  hand, 
unless  it  is  protected  by  patent  monopoly 
granted  by  the  Government,  its  mistakes 
can  almost  instantaneously  be  taken  ad- 
vantage of  by  its  competitors  with  very 
little  prospect  of  recovery  of  the  lost  ground. 
In  other  words,  a  non-monopolistic  Industry 
is  in  a  similar  position  to  a  Nation  always 


[55] 


THE    INDUSTRIAL    REPUBLIC 

at  war.  We  have  always  found  that  the 
Executive  Branch  of  the  Government  must 
be  entrusted  with  greater  powers  in  the  face 
of  common  danger  than  is  necessary  to 
grant  to  it  in  time  of  peace.  It  is  for  this 
reason  that  capital  is  unprotected  and  must 
have  sufficient  power  to  protect  itself 
against  business  competition,  either  by  in- 
herent right  or  by  consent  of  the  majority 
of  its  Industrial  Citizens.  So  long  as  it  is 
in  this  position,  it  must  have  the  power  to 
overrule  the  opinion  of  the  popular  majority 
on  such  points  as  do  not  interfere  with  the 
human  rights  of  those  engaged  in  the  busi- 
ness, to  the  end  that  its  principal  and  fair 
interest  rate  be  safeguarded. 

We  may,  therefore,  assume  that  the 
majority  of  industrial  citizens  should  select 
a  House  of  Representatives  with  certain 
qualifications  for  membership,  and  a  Senate 
with  still  higher  qualifications  for  member- 
ship, and  that  until  such  time  as  the  rights 
of  capital  can  be  properly  safe-guarded,  the 


[56] 


THE    INDUSTRIAL    REPUBLIC 

Executives  should  be  the  representatives  of 
capital,  with  veto  power  over  such  legis- 
lation as  might  be  unfair  to  the  rights  of 
capital,  while  provision  should  be  made  for 
over-ruling  the  veto  of  Executives  in  such 
matters  as  might  be  distinctly  human 
rights,  which  take  precedence.  It  should  be 
in  the  power  of  the  majority  of  all  industrial 
citizens  to  insist  that  all  who  wish  to 
remain  citizens  and  'participate  in  repre- 
sentation and  the  rewards  of  Industry, 
should  make  such  contribution  from  their 
wages  or  salaries  to  the  Industry,  as  might 
seem  necessary  or  advisable  to  properly  safe- 
guard the  rights  of  capital  to  the  further  end 
of  their  regaining  that  degree  of  financial 
participation  which  they  lost  through  past 
acceptance  of  advance  returns  in  the  shape  of 
wages. 

In  the  National  form  of  Government,  the 
citizens  make  the  laws  and  the  tax  payers 
furnish  the  capital.  In  Government  citizens 
and  tax-payers  are  one  and  the  same.     In 


(57) 


THE    INDUSTRIAL    REPUBLIC 

Industry,  under  this  form,  the  Industrial 
Citizens  would  be  making  the  laws  and  the 
common  stock-holders  would  pay  the  taxes, 
so  that  both  would  have  to  be  represented. 
The  only  way  to  make  both  bodies  the  same 
would  be  to  pay  off  all  of  those  who  furnish 
capital,  who  are  not  members  of  the  Organ- 
ization, and  insist  that  all  common  stock, 
once  owned  by  members  of  the  Organization, 
could  only  be  sold  to  other  members  of  the 
organization.  In  this  way  the  same  con- 
dition would  exist  as  in  our  Federal  Govern- 
ment. It  is  true  that  each  individual  would 
not  hold  the  same  amount  of  stock,  any 
more  than  each  citizen  pays  the  same 
amount  of  taxes.  An  identical  condition 
exists  however  in  both  management  and 
Government:  that  the  best  results  will  be 
obtained  as  incentive  and  opportunity  is 
given  to  acquire  property;  and  while  taxes 
are  paid  somewhat  in  proportion  to  one's 
ability  to  pay,  they  must  never  be  assessed 
in  such  a  waj'^  as  to  discourage  anyone  from 


[68] 


THE    INDUSTRIAL    RK PUBLIC 

producing  or  stop  the  desire  to  save. 
Having  organized  Industry  on  this  basis, 
its  success  would  largely  be  measured  by 
the  character  of  its  citizenship  as  regards 
its  intelligence  in  electing  representatives  to 
manage  wisely,  its  individual  desire  to  save 
and  contribute  both  its  energy  and  savings 
to  the  business,  and  its  realization  of  its 
duty  towards  the  organization,  as  well  as  of 
its  expectation  of  share  in  the  privileges. 


[59] 


THE    INDUSTRIAL    REPUBLIC 


CHAPTER  VII 

Industrial  Citizenshi'p 

In  every  industry  there  are  three  parties 
to  its  success;  the  (1)  Labor,  and  (2)  Capital 
necessary  to  engage  in  production  and  the 
(3)  Customer  to  take  the  product. 

In  seeking  the  customers,  we  find  many 
different  kinds  of  people  to  whom  to  sell. 
Some  are  very  reasonable  and  only  want  a 
square  deal,  getting  as  much  as  they  are 
entitled  to,  based  upon  cost  of  production 
plus  a  fair  profit.  The  only  measure  they 
have  of  this  as  far  as  their  particular 
interest  is  concerned,  is  that  the  efficiency 
of  the  manufacturing  organization  be  such 
that  they  get  as  good  value  as  they  could 
get  by  dealing  with  a  competitor.  This 
should  be  sufficient  to  obtain  the  good-will 
of   a   reasonable    customer,    and    anything 


1611 


THE    INDUSTRIAL    REPUBLIC 

which  he  gets  in  addition  to  this  should 
increase  the  amount  of  good-will  and  fortify 
the  Industry  against  possible  temporary 
mistakes  in  the  future.  This  class  of  custom- 
ers should  be  earnestly  sought  after  and 
obtained. 

On  the  other  hand,  there  are  many  other 
prospective  customers  who  are  not  satisfied 
unless  they  get  very  much  better  product 
than  they  can  get  anywhere  else,  and  they 
would  even  see  the  labor  and  capital  em- 
ployed insufficiently  rewarded  in  order  that 
they  might  get  a  better  product  at  a  lower 
price  than  they  could  get  it  elsewhere. 
This  class  of  customers  should  be  avoided 
in  fairness  to  the  other  customers  and  to  all 
the  interests  concerned. 

Next  we  consider  those  who  furnish  cap- 
ital. Many  people  having  the  capital  to 
lend  are  satisfied  with  the  current  interest 
rate  for  the  use  of  their  capital,  based  upon 
the  risk  taken,  this  being  sufficient  to 
obtain  their  good-will,  while  any  amount 


162] 


INDUSTRIAL     CITIZENSHIP 

in  addition  to  this  creates  such  increased 
good-will  and  gives  them  a  desire  to  supply 
the  capital  to  tide  the  Industry  over  any 
temporary  difficulties  into  which  it  may 
run.  Every  effort  should  be  made  to  obtain 
capital  from  men  such  as  these.  But,  we 
find  others  who  have  capital  to  lend,  who 
are  only  satisfied  when  they  obtain  the 
highest  possible  return  for  their  capital, 
regardless  of  the  rights  of  the  customer  to 
obtain  honest  product,  and  regardless  of 
the  rights  of  the  workers  to  obtain  an 
honest  return  for  their  labor.  Such  owners 
of  capital  are  undesirable  and  every  effort 
should  he  made  to  replace  them  with  men  of 
the  other  class. 

With  reference  to  the  labor  which  oper- 
ates the  Industry,  we  find  many  who  are 
satisfied  with  a  fair  return  for  their  labor 
and  quite  ready  to  concede  to  capital  a  fair 
return,  and  to  the  customer  a  fair  product, 
as  long  as  they  receive  the  current  market 
rate   for   their   services.     They    also    have 


[63] 


THE    INDUSTRIAL    REPUBLIC 

sufficient  good-will  towards  the  company  to 
produce  as  much  as  they  can  without  detri- 
ment to  health  and  their  good-will  is  in- 
creased by  sharing  in  any  further  reward 
after  the  other  two  partners  have  been 
taken  care  of.  Every  possible  effort  should 
he  made  to  obtain  the  good-ioill  of  this  class 
of  labor. 

On  the  other  hand,  we  find  many  laborers 
who  selfishly  believe  that  their  effort  is  the 
only  contributing  factor  to  the  success  of 
the  business,  and  think  of  nothing  but 
getting  the  highest  return  for  their  labor 
regardless  of  their  ability  or  the  amount 
they  produce,  and  regardless  also  of  the 
rights  of  capital  and  the  customer.  Often 
times,  they  figure  that  their  time  alone  is 
worth  their  reward,  regardless  of  what  they 
produce,  and  use  no  effort  to  do  an  honest 
day's  work. 

As  in  the  case  of  undesirable  customers 
and  capitalists,  this  type  of  labor  should  be 
antagonized  and  turned  aivay  whenever  pos- 


[04] 


INDUSTRIAL     CITIZENSHIP 

sible  in  all  fairness  to  the  others.  No  induce- 
ment should  be  made  to  retain  them  in 
Industry,  and  definite  encouragement  should 
be  given  them  to  leave  and  seek  employ- 
ment elsewhere. 

The  undesirable  partner,  whether  he  be 
customer,  capitalist  or  working  man,  whose 
only  reason  for  being  a  partner  is  his 
supreme  selfish  interest,  can  only  be  satisfied 
by  unfair  sacrifice  on  the  part  of  the  other 
partners.  Therefore,  his  good-will  should 
not  be  sought  and  any  effort  spent  upon 
him  should  be  by  way  of  inducing  him  to 
take  a  different  view  of  things.  When  such 
men  can  be  eliminated  from  industrial 
organization,  those  w^ho  remain  will  have  a 
community  of  interest  based  on  justice  and 
fairness,  and  the  good-will  of  each  should  be 
sought  after  by  the  other  two. 

It  is,  therefore,  desirable  that  the  policy 
of  up-to-date  Industrial  Organization  be  such 
as  to  gather  together  a  citizenship  of  the 
right  type,  offering  to  all  who  happen  to  be 


[G51 


THE    INDUSTRIAL    REPUBLIC 

engaged  in  the  Industry,  every  opportunity 
by  means  of  education,  example  and  friend- 
ship, to  become  a  citizen  of  right  type  and 
if  these  influences  fail,  to  eliminate  the 
undesirable  partner  from  the  Industry.  An 
Industrial  citizenship  of  this  nature  will 
break  down  the  present  diversified  interests 
which  are  always  a  source  of  friction  and 
c^-use  for  unrest,  and  by  equality  of  oppor- 
tunity create  an  organization  composed  of 
men,  the  great  majority  of  whom  will  have 
a  common  interest.  The  minority  will  always 
have  the  opportunity  of  qualifying  to  join 
with  them,  and  if  they  do  not  do  so,  will  at 
least  be  powerless  materially  to  interfere  with 
the  success  of  the  organization  as  a  whole. 

It  is,  of  course,  true  that  there  will  always 
be  an  undesirable  minority  of  employees 
in  any  Industry,  the  same  as  there  are 
undesirable  inhabitants  in  any  country. 
These  perform  an  economic  function  as 
Industry  cannot  always  employ  the  same 
number  of  people,  and  must  give  oppor- 


[66] 


INDUSTRIAL     CITIZENSHIP 

tunities  of  advancement  from  time  to  time. 
As  advancement  is  a  relative  term,  there 
must  be  some  who  do  not  move  up  and 
these  naturally  belong  to  the  class  which 
does  not  wish  to  be  fair  and  productive. 
As  the  needs  of  Industry  for  labor  vary, 
steady  employment  to  those  trying  to  do 
their  best  can  only  be  provided  by  laying 
off  those  who  have  not  earned  steady 
employment.  It  should  not  be  the  duty  of 
any  particular  Industry  to  provide  steady 
employment  or  advancement  for  these  lat- 
ter, but  there  is  always  a  distinct  duty  that 
the  industry  do  everything  possible  to  edu- 
cate and  assist  such  workers  to  change 
their  ways  and  produce  and  save,  becoming 
good  citizens  of  the  Industrial  Republic. 

The  world  does  not  owe  every  man  a 
living,  but  it  does  owe  every  man  the 
opportunity  to  earn  a  living,  and  each 
Industry  as  a  duty  should  do  its  share  in 
affording  men  the  opportunity  to  earn  that 
living  up  to  its  ability  to  do  so. 


[67] 


THE    INDUSTRIAL    REPUBLIC 

Having  adopted  a  policy  of  careful  selec- 
tion of  its  working  force,  management  can 
then  grant  to  those  who  qualify  by  age, 
length  of  employment  and,  possibly,  under- 
standing a  common  language,  the  rights  of 
Industrial  Citizenship  on  the  basis  of  equal- 
ity for  the  purpose  of  selecting  representa- 
tives by  a  direct  vote  with  power  to  legislate 
on  all  matters,  to  insure  justice  to  the  work- 
ing men  as  a  whole,  and  to  represent  them 
in  dealing  with  the  other  partners,  capital 
and  management,  for  the  mutual  advantage 
of  all.  Such  an  Industrial  Republic  would 
provide  for  a  legislature  composed  of  two 
Houses,  elected  by  the  working  force  of  the 
Industry,  the  qualifications  of  the  Upper 
House  being  such  as  to  make  this  House 
the  more  conservative  of  the  two  by  restrict- 
ing membership  to  men  of  somewhat  mature 
age  and  longer  period  of  service  with  the 
Industry.  This  is  especially  necessary  where 
there  is  a  large  labor  turnover,  where  the 
qualifications  for  industrial  citizenship  are 


[681 


INDUSTRIAL     CITIZENSHIP 

inadequate  properly  to  safeguard  the  indus- 
try, although  such  precautions  would  auto- 
matically become  more  unnecessary  when 
an  Industry  became  stable,  with  a  relatively 
constant  working  force. 

This  Industrial  legislature  would  have 
the  power  to  legislate  on  all  matters  affect- 
ing justice  to  the  working  force,  while 
measures  passed  by  a  majority  vote  of  both 
Houses  would  go  to  the  Chief  Executive  of 
the  Branch  of  the  Industry  which  the  Legis- 
lature represents,  or  the  Industry  as  a  whole, 
in  case  it  covers  this  extent,  for  approval 
or  veto,  the  same  as  is  done  in  our  Govern- 
ment by  the  Governor  of  a  State  or  by  the 
President.  In  case  of  veto,  a  measure  would 
go  back  to  the  Houses,  and  if  passed  by 
a  two-thirds  vote  of  both  Houses,  such 
action  would  be  final,  unless  it  should  be  a 
matter  unfairly  affecting  the  interests  of 
those  who  furnished  the  money,  or  the 
customers  who  buy  the  product,  which 
would  be  distinctly  unfair  to  them,  in  which 


169] 


THE    INDUSTRIAL    REPUBLIC 

case  it  would  go  before  the  Board  of 
Directors  of  the  Conipany  for  decision. 

If  all  capital  used  by  the  Company  is 
properly  safe-guarded  as  to  principal  and 
interest  by  the  savings  of  the  working 
force,  and  through  ability  to  tax  the  work- 
ing force,  as  in  the  case  of  our  National 
and  State  Government,  the  passing  by  a 
two-thirds  vote  over  the  veto  would  be 
final  without  reference  to  any  other  body. 
This  would  be  the  condition  of  an  ideal 
industrial  republic.  This  condition  can  just- 
ly be  reached  only  when  the  working  force 
as  a  whole  has  the  ability  and  intent  to  risk 
its  own  capital  as  a  proper  safe-guard  for 
outside  capital  which  it  uses  in  its  business. 

Such  a  state  of  industrial  organization  is 
a  highly  desirable  one  as  being  in  line  with 
our  American  ideals  of  Government.  In 
such  an  organization  all  capital  except  that 
furnished  by  the  laboring  force,  would  be 
put  at  the  disposal  of  the  laboring  force  for 
the  purpose  of  production  and  the  general 


ro] 


INDUSTRIAL     CITIZENSHIP 

benefit  of  the  community,  and  yet  due  con- 
sideration of  the  rights  of  capital  would  be 
given.  Any  attempt  of  the  working  man 
to  appropriate  the  capital  of  others  for 
his  own  use,  without  proper  safeguard 
and  without  paying  a  fair  return  for  its 
use,  would  only  result  in  disaster.  This 
capital  would  soon  be  used  up,  and  it 
would  be  impossible  for  the  Industry  to 
obtain  any  more. 

On  the  other  hand,  any  attempt  of  those 
who  furnish  capital  to  insist  upon  holding 
control  of  the  Industry,  without  affording 
the  opportunity  for  those  who  labor  to  apply 
their  savings  and  pledge  their  capital  to 
the  support  of  the  Industry,  or  to  prevent 
the  laborer  from  being  represented  in  the 
management  of  the  business,  to  the  extent  to 
which  his  interests  are  at  stake  and  in 
which  he  has  taken  a  risk,  will  result  in  a 
discontented  labor  force,  based  upon  a  feel- 
ing of  injustice,  which  will  so  adversely 
affect  production  that  the  interests  of  those 


[71] 


THE    INDUSTRIAL   REPUBLIC 

who  furnish  the  capital  and  who  buy  the 
product  will  be  in  jeopardy. 

The  time  has  now  arrived  when  encourage- 
ment must  be  given  to  the  progressive  evolution 
of  Industry  from  the  state  where  labor  hires 
itself  out  to  capital,  to  the  state  where  labor 
will  manage  the  business  and  undertake  the 
obligations  which  are  necessary  to  insure  those 
who  have  capital  that  they  may  safely  lend  it 
to  the  Organization  of  those  who  labor,  for  the 
mutual  benefit  of  both. 

The  main  cause  of  industrial  unrest  is 
the  ill-will  of  the  laboring  force.  We  have 
spent  relatively  too  large  an  effort  in  the 
past  to  obtain  the  good-will  of  the  customer, 
and  those  who  furnish  the  capital,  and  too 
little  to  obtain  the  good-will  of  labor.  The 
time  has  come  for  a  serious  consideration 
and  some  definite  action  toward  the  solution 
of  this  problem.  Realizing  the  problem, 
the  possible  solutions  will  be  many.  Any 
real    solution,    however,    must    obtain    the 


[721 


INDUSTRIAL     CITIZENSHIP 

good-will  and  confidence  of  labor,  and  this 
can  only  be  done  by  direct  representation 
of  labor  in  management. 


ri] 


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